This study was embarked upon with a view to determining the impact of interest rate on other selected macroeconomic variables in Nigeria. Data were sourced from CBN Abuja and NBS. Data were analyzed using the ordinary least square regression (OLS). Results indicate that: Interest rate is inversely related investment and also negatively related with GDP. On the basis of the above stated findings some policy recommendations were made.(1)Government should establish policies that encourage increase in savings deposit rate, reduction in lending rates and also, efficient and reliable financial institutions encourage people to save. (2) The require reserve ratio should be to strengthen the lending rate of commercial banks. (3) We recommend that the government and financial authorities should implement policies that favour income growth such as job creation and increase in salaries and wage increase as these will affect investment significantly.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Interest rates play important role in controlling major macroeconomic variables. The primary role of interest rate is to help in the mobilization of financial resources and to ensure efficient utilization of resources for the promotion of economic growth and development (CBN 1970).

However, they are various states of interest rates in the financial system. They are generally classified into two categories: Deposit and lending rates. Deposits rate are paid to savings and time deposits of different maturities, while lending rates are interest rates charged on loans to customers and they vary according to cost of loanable funds and lending margins.

A number of factors influence the behaviour of interest rates in an economy. Prominent among these are the volume of savings, inflation, investment, government spending, monetary policy and taxation constitute the major source (supply) of credit while investment represents the major demand....

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